Monterey Park to consider first earthquake policy in 98-year history

MONTEREY PARK >> In the nation’s No. 1 state for damaging temblors, nine Southern California cities in an insurance group don’t have earthquake coverage, according to documents recently obtained.

The Independent Cities Risk Management Authority has 20 members from Los Angeles, Orange and San Bernardino counties. Some 45 percent of them chose not to include an earthquake policy in their annual budget. Among them are Colton, El Monte, El Segundo, Fullerton, Hawthorne, Hermosa Beach, Monrovia, Monterey Park and South Gate.

In light of the 5.1 La Habra Earthquake two months ago, the Monterey Park City Council decided last week to consider earthquake insurance for the first time in its 98-year history.

Mayor Anthony Wong said Monterey Park has many expensive assets, including its water company, so it would be prudent to get insured for “the big one.”

“We can see there are earthquakes all over,” Wong said. “The experts in earthquake study — all of them — indicate that at any time, Southern California would have a big earthquake. So in case that happens, it would be very costly for the city to replace (destroyed property).”

With little discussion, the City Council unanimously voted May 21 to consider the purchase of earthquake insurance from the ICRMA as part of the fiscal year 2014-15 budget process.

State law does not require cities to purchase earthquake insurance, but individual municipal charters may have that requirement, said Patrick Storm, spokesman of the California Department of Insurance.

Neither the California Department of Insurance, Insurance Institute Network of California, California Earthquake Authority nor the League of California Cities keeps a record of which cities carry quake coverage. Spokespersons for each said they aren’t aware any agency or organization has that data.

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There are numbers for homeowners. Less than 11 percent of California residents have earthquake insurance, according to the California Department of Insurance.

Each year Southern California has about 10,000 earthquakes, but only several hundred are felt because they are greater than magnitude-3.0, according to the U.S. Geological Survey.

If a large earthquake hits, however, the aftershocks will be felt for many months, according the USGS. The spate of temblors in late March and early April gave residents a refresher course on California’s No. 1 natural disaster.

This year Angelenos commemorated the 10-year anniversary of the 1994 Northridge Earthquake, a magnitude 6.7 earthquake that killed at least 57 people and caused $20 billion in damage as well as $49 billion in economic loss, according to the Southern California Earthquake Center.

Local governments sometimes decide to retain the responsibility for losses to government property, according to a Federal Emergency Management Agency study entitled “Earthquake Insurance: A Public Policy Dilemma.” The 1985 report is the most recent one the FEMA website offers on the topic.

Risk managers for large governmental units gave several reasons why they would self-insure, including having to pay expensive earthquake premiums for something that might not happen, the 34-page report reads.

“They also felt that a large local government representing hundreds of thousands of constituents would have sufficient political influence and legal expertise to secure an optimum amount of federal disaster relief in the event of an earthquake,” the report reads.

Yet some municipalities must purchase temblor coverage because of debt. Some types of revenue bonds require it, according to the study.

Tom Cody, Monterey Park’s director of human resources and risk management, said if the council decides to purchase a policy, a $147,000 annual plan was the best choice. The $25 million policy would come with a 5 percent deductible. That means the city would have to pay $1.25 million before insurance money kicks in.

ICRMA would cover City Hall, the public library, City Hall parking, three fire stations, the Langley Center, the Delta Water Plant and the Emergency Operations Center.

Monterey Park’s most valuable facilities is a $22 million City Hall and a $25 million library, Cody said.